Long Term Effects of Temporary Labor Demand: Free Trade Zones, Female Education and Marriage Market Outcomes in the Dominican Republic

Transcription

1 Long Term Effects of Temporary Labor Demand: Free Trade Zones, Female Education and Marriage Market Outcomes in the Dominican Republic Maria Micaela Sviatschi Columbia University June 15, 2015

2 Introduction Many developing countries have experienced a rapid period of industrialization which consisted in the expansion of jobs in the export manufacturing sector. Most of the jobs are in the textile industry and most of the workers are women. What are the effects female factory jobs on human capital investments? Positive effects: if factories are in sectors that reward extra years of education RS schooling (Heath and Mobarak, 2012) Negative effects: if factories hire unskilled workers at attractive wages OC students in legal working age schooling (Atkin, 2012) Can temporary labor market opportunities shift developing countries to a good equilibrium in female education and associated outcomes? I study the long term effects of female factory jobs on women status in the Dominican Republic.

3 Introduction Do women in places where female labor market existed in previous periods continue increasing their schooling and age of marriage in the absence of future labor market gains? This might be of particular importance for garment industries in Latin American countries, which were strongly affected by posterior competition coming from Asian countries.

4 Introduction I exploit the sudden and massive growth of female jobs in free trade zones (FTZs) in the Dominican Republic in the 1990s, and subsequent decline in the 2000s. In the 1990s, textile manufacturing boomed as free trade zones (FTZs) were opened in the Dominican Republic female employment rose However, in the 2000s, labor market opportunities for women decreased since textile sector contracted due to Asian competition and the end of the main commercial agreement with the US. Female employment was reduced by about 45 percent. By 2008, about 70 percent of women who were displaced from the textile industry were still unemployed. These posterior contractions in the 2000s allow us to analyze if the effects are sustained long term, even in the absence of labor market opportunities.

5 Outline Background on education and early marriage in the Dominican Republic and History of FTZs Data Identification strategy How can female factory jobs can change education for women? Main findings Mechanisms Robustness checks What are the effects on marriage markets? Are these effects long lasting?

6 Background on Education and Early Marriage in the Dominican Republic Only 40% of students in primary level continue secondary education (Gajardo 2007). While men tend to drop out of school to participate in the labor market, women tend to drop out of school due to marriage and children. 42% of women between 20 and 49 years old were married before the age of 18 in 2010.

7 Background on Education and Early Marriage in the Dominican Republic Only 40% of students in primary level continue secondary education (Gajardo 2007). While men tend to drop out of school to participate in the labor market, women tend to drop out of school due to marriage and children. 42% of women between 20 and 49 years old were married before the age of 18 in Why? lack of opportunities for women, way to escape poverty, importance of the role of being a young mother (ONE 2010). Women who marry early are characterized by low levels of education and income.

8 History of FTZs Industrial free zones were first implemented in the Dominican Republic in 1969 as part of a national policy that involved import substitution and export promotion. In 1984, industries in the FTZs benefited from the transition to a free exchange rate and preferential tariff treatment from the United States (Initiative for the Caribbean Basin). By 1996, 500 firms were active in these zones, making an average of 10 firms per FTZ. One of the main sources of economic growth, surpassing the agricultural sector (Liberato and Fennell 2007).

9 History of FTZs

10 History of FTZs During the analyzed period, industrial free zones were the main generator of employment in the country (CEPAL 1999). In 1996, employment in these areas represented 6% of the economically active population. Most of these activities are labor intensive and require low skill workers (CNZF 2002). The average wage in free trade zones was higher than the average wage outside the zones (Madani 1999, Reyes Castro et al. 1993). The composition of wages was based on productivity and other incentive bonuses as well as payments for overtime and piece work (Romero 1995). Most workers completed primary 39.6% and secondary education 47.2% (ENFL, 2005 and 2006).

11 History of Industrial Free Zones

12 Data Demographic Health Surveys (DHS) for the years 1986, 1991, 1996, 2002, and These surveys provide information on health, nutrition, and demographic indicators for the Dominican Republic. The target population for DHS is defined as all women of reproductive age (15-49 years old) and their young children under five years of age. Limitation: province of residence at the time of the survey rather than when the FTZ opened and self reported measure for years of education. Industry data from National Free Zones Council: Information on the dates of opening and location of every industrial park There are 54 industrial parks with around 10 firms per industrial park.

13 Identification Strategy I keep only provinces that experienced an opening and exploit three sources of variation: i) provinces that opened industrial parks relative to others, ii) after opening of industrial park relative to before and iii) cohorts most affected by the opening relative to other cohorts of young women. I exploit variation on the age of women at the time of the opening using thresholds in key ages: 15 and 16 years. In the Dominican Republic, basic education is compulsory and covers the 6-14 years age group. Secondary education is not compulsory, but it is public. Dropouts occur at the age of for women.

14 Identification Strategy: Test of Pre-existing Differences Following Bailey (2006), I generate province-level characteristics for each provinces from the 1986 DHS survey and estimate the following equation: Time1986toOpening p = α + βx p ɛ p1986 Time1986toOpening p indicates the years elapsed from 1986, the year that the large expansion of the free industrial zones started, until the year they opened in a particular province.

15 Identification Strategy: Test of Pre-existing Differences (A) Demographic Characteristics Proportion of Women in Age (12.08) Proportion of Women in Age (11.57) Proportion of Women in Age (11.36) Proportion of Households in Urban Areas (1.765) Proportion of Owners of Land Worked (2.539) R-squared (B) Social Characteristics Average Years of Education for Women (0.805) Proportion of Literated Women (6.890) Average Years of Education for Men (5.890) Average Age of First Marriage (2.493) Average Age of First Birth (0.979) Proportion of Married Women (5.897) Average Age of First Intercourse (2.924) R-squared (B) Labor Characteristics Proportion of Women Earning a Salary (2.783) Proportion of Women Working for a Non-Family Member

16 Identification Strategy: Test of Pre-existing Differences (C) Labor Characteristics Proportion of Women Earning a Salary (2.783) Proportion of Women Working for a Non-Family Member (2.686) Proportion of Women Working Before Marriage (5.628) R-squared 0.03 Low R2 and free trade zones do not seem to be correlated with female education.

17 Identification Strategy: Difference-in-difference (DD) Outcome ihpt =α + βftz pt + δprovince p + πyear t + θtrend p + γx hpt + νx pt + ε ihpt YearsEducation the years of education reported by women i in household h in province p in year t. FTZ pt is a dummy variable that indicates the existence of an FTZ in province p in year t. Year t and Province p fixed effects, as well as province time trends. X ihpt includes type of place of residence, age, literacy, if the main source of drinking water comes from piped water, type of toilet facilities, if the household has electricity, radio, television, refrigerator and car, main floor and wall material, and number of household members. X pt number of construction permits in province p in year t.

18 Schooling and Female Factory Jobs, (DD) (1) (2) (3) (4) (5) (6) (7) (8) Enrollment in plete Com- Years of Years of Years of Enrollment in plete Com- Years of educatiotiotion primary primary educa- educa- education secondary secondary FTZ 0.408*** 0.386*** 0.359*** 0.436* ** ** (0.141) (0.131) (0.127) (0.211) (0.022) (0.017) (0.021) (0.013) Mean of dependent 7,82 7,82 7,82 7, N 55,894 55,894 55,894 51,949 27,975 51,991 39,244 51,949 R Province FE YES YES YES YES YES YES YES YES Year FE YES YES YES YES YES YES YES YES Province trends YES YES YES YES YES YES YES Cohort FE YES YES YES YES YES YES Province year of YES YES YES YES YES birth trends Covariates YES YES YES YES YES

19 Schooling by Age at Opening Parameter estimate (Years of education) Age at opening

20 Schooling by Age at Opening Parameter estimate (Secondary enrollment) Age at opening

21 Identification Strategy: Difference-in-difference-in-difference (DDD) This strategy compares the outcomes of women who are affected by the opening to the outcomes of women who are not affected by the opening (first difference) in provinces with an earlier FTZ versus provinces with later FTZ (a second difference) over time (the third difference) Outcome ihpt =α + β 1 FTZ pt + β 2 age6to16 i + β 3 FTZ pt age6to16 i + δprovince p + πyear t + θtrend p + γx hpt + νx pt + ε ihpt

22 Schooling and Female Factory Jobs (DDD) (1) (2) (3) (4) (5) Enrollment Enrollment Complete in primary in secondary primary Years of education Complete secondary FTZ age6to ** ** 0.023** 0.025*** (0.122) (0.009) (0.013) (0.010) (0.009) Mean of dependent 7, N 46,026 23,784 46,067 34,503 46,026 R Province FE YES YES YES YES YES Year FE YES YES YES YES YES Province trends YES YES YES YES YES Cohort FE YES YES YES YES YES Province year of birth trends YES YES YES YES YES Covariates YES YES YES YES YES

23 Results on Education (Event Study) Notes: This graph plots the coefficients obtained from a regression of the outcome on dummies of years exposed until 16. I define year exposed until 16 by subtracting from the year of opening the year when each woman was 16 years of age. The regressions control for province, year and province time trends. The Y-axis shows the estimated coefficients and the X-axis shows the years. Standard errors are clustered at the province level.

24 Mechanisms Behind Schooling Effects Income? Infrastructure? Migration? Returns to schooling?

25 Mechanisms Behind Schooling Effects (1) (2) (3) (4) (5) (6) Years of Years of Enrollment Enrollment education education in secondary in secondary Years of education Enrollment in secondary FTZ age6to * 0.262** 0.236** 0.030** 0.028** 0.021* (0.119) (0.122) (0.103) (0.012) (0.013) (0.010) Parks 0.085** (0.040) (0.004) Construction permits * (0.001) (0.000) N 49,660 46,026 29,808 49,716 46,067 29,831 R Province FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES Province trends YES YES YES YES YES YES Cohort FE YES YES YES YES YES YES Province year of birth trends YES YES YES YES YES YES Sub-sample of non-working women YES YES

26 Mechanisms Behind Schooling Effects (Using IDB surveys) (1) (2) Years of education Years of education FTZ age6to * 0.249* (0.123) (0.125) Household income 5.81e-05*** (1.85e-06) N 110, ,706 R Province FE YES YES Year FE YES YES Province trends YES YES Cohort FE YES YES Province year of birth trends YES YES

27 Migration and Female Factory Jobs (1) (2) (3) (4) (5) (6) (7) (8) Years of Years of Years of Age of Age of Age of education education education marriage marriage marriage Years of education Age of marriage FTZ 0.423** 0.385*** 0.488*** 0.350** 1.323*** 1.276*** 1.332*** 1.337*** (0.164) (0.127) (0.160) (0.127) (0.209) (0.247) (0.224) (0.245) Movers *** *** (0.108) (0.0855) Mean of dependent 7,82 7,82 7,82 7, N 41,985 54,778 40,869 55,894 17,732 25,714 17,506 25,940 R Province FE YES YES YES YES YES YES YES YES Year FE YES YES YES YES YES YES YES YES Province trends YES YES YES YES YES YES YES Nonmigrants YES YES YES YES Without just movers YES YES YES YES

28 Mechanisms Behind Schooling Effects Expectations Even though most of the jobs were unskilled, they were better paid than other labor market opportunities and provided the main source of female employment over the period of analysis. In equilibrium, I observe that most women working in FTZs had complete secondary education (40%). Before the FTZs opened, about 33% of high educated women were working in contrast to 43% after the opening. After the FTZs opened proportion of educated women working in professional, managerial, technical and skilled manual positions than before the opening.

29 What are the Effects on Marriage Markets? (1) (2) (3) (4) (5) (6) (7) Age of Age of Age of Early Early Early Female marriage marriage marriage marriage marriage marriage labor FTZ age6to16 Years of education Female labor 1.214*** 0.882*** 1.197*** *** *** *** 0.035** (0.196) (0.127) (0.191) (0.018) (0.012) (0.018) (0.015) 0.429*** *** (0.016) (0.001) 0.598*** *** (0.133) (0.008) Mean of dependent N 33,897 33,863 33,839 46,069 46,026 45,987 45,987 R Province FE YES YES YES YES YES YES YES Year FE YES YES YES YES YES YES YES Province trends YES YES YES YES YES YES YES Cohort FE YES YES YES YES YES YES YES Province year of birth YES YES YES YES YES YES YES trends Covariates YES YES YES YES YES YES YES

30 Event Study Age of Marriage Age of marriage Years with respect to date of opening

31 Robustness Checks-Schooling, Female Factory Jobs (Already Married) (1) (2) (3) (4) (5) Enrollment Complete Age of in secondary secondary marriage Years of education Early marriage FTZ (0.228) (0.020) (0.016) (0.165) (0.025) N 22,709 22,735 22,737 20,867 20,867 R Province FE YES YES YES YES YES Year FE YES YES YES YES YES Province trends YES YES YES YES YES Cohort FE YES YES YES YES YES Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

32 Robustness Checks-Household Fixed Effects (1) (2) (3) (4) (5) Enrollment Complete Age of in secondary secondary marriage Years of education Early marriage FTZ age6to ** 0.067* * 1.428** ** (0.276) (0.036) (0.039) (0.726) (0.038) N 15,890 14,667 14,648 9,971 14,668 R Province FE YES YES YES YES YES Year FE YES YES YES YES YES Province year of birth YES YES YES YES YES trends Relationship YES YES YES YES YES Household FE YES YES YES YES YES Age YES YES YES YES YES

33 Consequences of Improving Schooling and Delaying Marriage (1) (2) (3) (4) (5) (6) (7) Out-ofwedlock Age at first Early Desired Early birth intercourse intercourse fertility birth Age at first birth Child survival FTZ age6to *** *** 0.725*** *** *** ** (0.143) (0.015) (0.113) (0.014) (0.030) (0.005) (0.006) Mean of dependent N 31,151 46,069 26,779 46,069 46,069 31,151 29,184 R Province FE YES YES YES YES YES YES YES Year FE YES YES YES YES YES YES YES Province trends YES YES YES YES YES YES YES Cohort FE YES YES YES YES YES YES YES Province year of birth YES YES YES YES YES YES YES trends Covariates YES YES YES YES YES YES YES

34 Summary FTZs open expectations of getting a job after school for women years of education for those in schooling ages age of marriage better health outcomes FTZs open female labor force for those older of 25 at the time of opening (short run) and female labor force for those younger than 16 (long run)

35 Are these Effects Long Lasting? I study whether the effects found in education and marriage revert due to the presence of negative female labor demand shocks. Increased competition coming from Asian countries in 2000 End of the preferential tariff treatment from the United States (Multifiber Arrangement) in 2005 Large decrease in manufacturing textile activities in free trade zones between 2000 and 2007 Larger negative effect on industrial parks with a large apparel sector than those with a large service sector The textile sector employment was reduced by about 45%. The service sector was not able to absorb displaced workers (most of it expansion after 2006).

36 Are these Effects Long Lasting? Approach 1 Outcome ihpt =α + β 1 FTZ p,t + β 2 Shock t + β 3 Textile p + β 4 Shock p Textile t + δprovince p + πyear t + θtrend p + γx hpt + νx pt + ε ihpt where Shock t is a dummy variable for after 2000 and PrTextile p is the proportion of firms in the textile industry before 2000 in province p. The interaction between both variables control for the effect of the negative shock. For example, if a province has a 60% of the firms in the manufacturing industry just before the shock, the variable shock is equal to 0 for the years before 2000 and 60% after 2000.

37 Are these Effects Long Lasting? Approach 2 Interact the variable FTZ pt with a variable that takes the value of zero in province p in the year 2000 and onwards if that province has more than 50before the shock. Outcome ihpt =α + β 1 FTZ (1 1 {Year 2000 & Textile 0.5} ) pt + δprovince p + πyear t + θtrend p + γx h,p,t + νx p,t + ε i,h,p,t where (1 1 {Year 2000 & Textile 0.5} ) takes the value of 0 after the year 2000 if the province has more than 50 percent of firms in the textile industry before the shock.

38 Are these Effects Long Lasting? (1) (2) (3) (4) (5) (6) Years of Enrollment Enrollment Complete education in secondary in secondary Secondary Years of education FTZ 0.329** 0.036** 0.030** (0.156) (0.015) (0.012) Complete secondary Shock textile (0.243) (0.022) (0.019) FTZ (1 1 {Year 2000 & Textile 0.5} 0.341** 0.028*** *** (0.128) (0.009) (0.007) N 55,894 55,894 55,894 55,894 55,894 55,894 R FTZ age6to16 Shock textile age6to ** 0.029** 0.025*** (0.126) (0.013) (0.008) (0.494) (0.039) (0.038) FTZ age6to16 ( ** 0.029** 0.026*** 1 {Year 2000 & Textile 0.5} (0.111) (0.011) (0.008) N 46,026 46,026 46,026 46,026 46,026 46,026 R Province FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES

39 Summary Some FTZs close expectations of getting a job after school for women but not to the pre-opening levels those women who were in schooling ages at the time of opening, they keep increasing their years of education. Gains in the marriage market?

40 Spillovers in the Marriage Market (1) (2) (3) (4) (5) Husband s Husband in Difference in Husband stays Divorce education high skilled job age at home FTZ age6to ** 0.672*** 0.033** ** (0.013) (0.168) (0.014) (0.310) (0.012) Mean of dependent N 34,576 31,224 19,020 21,598 23,544 R Province FE YES YES YES YES YES Year FE YES YES YES YES YES Province trends YES YES YES YES YES Cohort FE YES YES YES YES YES Province year of birth trends YES YES YES YES YES

41 Conclusions Results from dif-in-dif, event study analysis and triple differences show that the opening of FTZs is associated with: Increase in women s years of education (additional 0.3 years of education) Main channel: expectations Increase in age of marriage and decrease in probability of early marriage (marrying under age 18) Main channel: education Increase in labor force participation and work outside home

42 Conclusions The effect persists even after the end of a trade agreement with the U.S. and Asian competition that led to a decline in FTZ jobs in the 2000s. the increase in (some) girls education changed marriage markets, with the girls whose education increased due to the FTZs marrying later, matching with a higher-quality husband, giving birth later, and having children that are more likely to survive infancy. Female labor market opportunities can profoundly change female outcomes in developing countries through general equilibrium effects in the education and marriage markets.